NETWORK CONFIGURATION
Conventional Network
Customer Store Materials
DC
Component Manufacturing Vendor
DC
Final Assembly
Finished Goods DC
Components DC Vendor
DC Plant
Warehouse
Finished Goods DC
Customer DC
Customer DC
Customer DC
Customer Store Customer
Store Customer
Store Customer
Store
Vendor DC
5-2
Network Design
•
Network design is a strategic decision. It has a long-term impact
on a supply chain’s performance.
•
It determines very much flexibility / responsiveness and cost
effectiveness of a supply chain.
–
Cost focus: Find the lowest-cost location for manufacturing
facilities.
–
Responsiveness: Locate facilities closer to the market to react
quickly to changing market needs.
Customer DC
Where inventory needs to be for a 5 day order
response time - typical results --> 2 DCs
Customer DC
Where inventory needs to be for a 3 day order
response time - typical results --> 5 DCs
Customer DC
Where inventory needs to be for a next day order
response time - typical results --> 13 DCs
Customer DC
Where inventory needs to be for a same day / next
day order response time - typical results --> 26 DCs
Service and Number of Facilities
Number of
Facilities
Inventory Costs and Number
of Facilities
Transportation Costs and
Number of Facilities
4-13
Transportation
Costs
Number of facilities
Facility Costs and Number
of Facilities
4-14
Facility
Costs
Number of facilities
4-15
Transportation
Total Costs Related to
Number of Facilities
T
o
tal
C
o
sts
Number of Facilities
Inventory Facilities
Total Costs
4-16
Response Time
Variation in Logistics Costs and Response
Time with Number of Facilities
Number of Facilities
Total Logistics Costs
Consolidation Vs Localization
•
Consolidation is necessary if products are relatively
standard and virtually no local features are needed
to be added.
•
Localization is suitable for products need high
responsiveness and local features are important.
–
HP design different printer for North American, Europe,
and Asia.
Factor Influencing Network Design
Decisions
•
Macroeconomic
•
Politic
•
Social
Macroeconomic Factors to Consider in Designing
a Network
•
Tariff and Tax incentives
–Guang Zhou offered free tax and other incentives for investors. Many manufacturing and High Tech. companies established factories in Guang Zhou as a result.
–US responded import and quota barriers by developing supplier in many countries.
•
Exchange Rates and Demand Risks
–In 1980s yen was appreciated. Exporting companies received lower profits. Many companies responded by moving operations overseas.
4-20
The Role of Distribution
in the Supply Chain
•
Distribution
: the steps taken to move and store a
product from the supplier stage to the customer
stage in a supply chain
•
Distribution directly affects cost and the customer
experience and therefore drives profitability
•
Choice of distribution network can achieve supply
chain objectives from low cost to high
responsiveness
•
Examples: Wal-Mart, Dell, Proctor & Gamble,
Grainger
4-21
Factors Influencing
Distribution Network Design
•
Distribution network performance evaluated
along two dimensions at the highest level:
–
Customer needs that are met
–
Cost of meeting customer needs
•
Distribution network design options must
therefore be compared according to their
impact on customer service and the cost to
provide this level of service
4-22
Factors Influencing
Distribution Network Design
•
Elements of customer service influenced by network structure:
–
Response time
–
Product variety
–
Product availability
–
Customer experience
–
Order visibility
–
Returnability
•
Supply chain costs affected by network structure:
–
Inventories
–
Transportation
–
Facilities and handling
–
Information
•
Produce consumer product
•
Main office in Cincinnati, Ohio, USA
•
Global scale benefits of a $79 billion
global company
•
300 brands in over 160 countries
Global Bussiness Unit
-
Beauty & Grooming
-
Health & Well Being
-
Household Care
Restrukturisasi P & G:
Menjadi lebih efisien dan responsive• Secara umum terjadi perampingan dari 11 region menjadi 7 region. •North America
•South America •Western Europe
•Middle East dan Eastern Europe •North East Asia
•Greater China
•AAI dengan pusat di Singapore
• Thailand menjadi pusat produksi shampoo.
• Philippine akan dijadikan pusat pabrik detergent.
• Indonesia akan menjadi pusat produksi produk kesehatan dan perawatan rambut.
• Marketing berpusat di Singapore.
Keuntungan Restrukturisasi P & G
•
Penghematan biaya
transportasi staff
•
Peningkatan economic of
relationship dengan
supplier (membeli dengan
skala yang lebih besar)
•
Penghematan biaya
promosi
Case
CD-RW @
Hewlett-Packard
Initial Configuration
Japan
Malaysia
Netherlands
Singapore
USA
Europe
Asia Pacific
USA
Canada
Mexico
Latin America Mexico
USA - Miami Japan
Malaysia
Competitors Are Mushrooming:
Only 4 in 1997, more than 50 in 2001
Price decreases by 50% annually
Toward Major Changes
Problems with Initial Configuration
•
Long
•
Costly
•
Unresponsive
126 days of fulfillment
cycle:
–Transit from supplier to DC 30 days
–Involving 5 countries and 6 time zones
–Support from top management
–Incentives for keeping the spirit high
–Beer game to attract involvement (including suppliers)
•
Inventory turnover increases from 3 to 45
•
Lead time decreases from 126 days to 8
days.
•
Cost savings of US $ 50 million (from
overhead, inventory, negotiation with
suppliers)
MODELS FOR LOCATION PROBLEMS
•
Single Facility Location:
Center of Gravity, Grid,
Centroid.
•
Multi Facility Location:
Multiple gravity, Mixed
integer programming, Simulation, Heuristics.
•
Capacitated Plant Location Model
Gravity Location Models
• Is used to find the location that minimizes the cost of transporting raw materials from the points of supply and transporting finished goods to the customers.
• Let:
Xn, Yn: coordinate location of either a market or a supply point
Cn : cost of shipping one unit for one km from or to location n the facility to be located
Dn : Quantity to be shipped from or to location n to the facility dn : the distance to or from facility n to the facility
• The distance dn is approximated as follows: (If (x,y) is the coordinate of the location of the facility)
•
If there are k supply and market points then total cost of
transportation to and from the facility is:
•
The location that minimizes the TC can be obtained with the
following steps:
1. For each supply or market position n, calculate dnas above 2. Obtain a new location (x’,y’) where:
3. If the new location is almost the same as (x,y) then stop, otherwise
There are six existing facilities. The new one ( a
warehouse) will serve all six facilities.
5, 1
The Relevant Data
Xn Yn dn Dn Cn
First iteration using (x,y) = (0,0), Result (6.0, 6.4)
Xn Yn dn Dn Cn Total 2128.5 2280.2 354.2
X’=2128.5/354.2=6.0 Y’=2280.2/354.2=6.4
Second Iteration: Result (5.4, 6.9)
Xn Yn dn Dn Cn Total 5710.8 7302.1 1063.2
Third Iteration: Result (5.1, 6.9)
Xn Yn dn Dn Cn Total 6550.2 8807.8 1269.9
Fourth Iteration: Result (5.1, 6.9)
Final Position: Warehouse in (5.1, 6.9)
• Suppose there are n factories in different locations to be selected to satisfy demand in m market areas. Each factory location is associated with a fixed cost. The production and delivery costs to from each factory to each demand point is known.
• The problem to solve is: Which factory to open and from which factory each market demand is fulfilled?
• Suppose:
i = factory location (1, 2,…n) j = demand point (1, 2, … m) Dj = demand of market area j Ki = capacity of factory i fi = annualized fixed cost for factory i
cij = cost of producing and delivering one unit of product from factory i to demand area j
yi = 1 if factory i is selected, 0 otherwise xij = the amount shipped from factory i to market j
Capacitated Location Problem
Problem Structure
Factory (i)
Market area (j) x11
x32
Capacitated Location Problem
i Fixed JTM JTG JB JKT SS
Surabaya 250 5 10 15 16 25 5000 Pasuruan 165 10 12 17 18 25 3200 Gresik 180 6 9 14 12 24 4000 Tangerang 200 15 7 4 6 10 4000
Permintaan 2000 1800 1500 3000 1700
Penyelesaian dengan software LINDO
• MIN 250 Y1 + 165 Y2 + 180 Y3 + 200 Y4 + 5 X11 + 10 X12 + 15 X13 + 16 X14 + 25 X15 + 10 X21 + 12 X22 + 17 X23 + 18 X24 + 25 X25 + 6 X31 + 9 X32 + 14 X33 + 12 X34 + 24 X35 + 15 X41 + 7 X42 + 4 X43 + 6 X44 + 10 X45
• SUBJECT TO ! Capacity of each factory
X11 + X12 + X13 + X14 + X15 - 5000 Y1 <= 0
X21 + X22 + X23 + X24 + X25 - 3200 Y2 <= 0 X31 + X32 + X33 + X34 + X35 - 4000 Y3 <= 0 X41 + X42 + X43 + X44 + X45 - 4000 Y4 <= 0
! Demand of each market areas X11 + X21 + X31 + X41 = 2000 X12 + X22 + X32 + X42 = 1800
• ! Binary number of factory
OBJECTIVE FUNCTION VALUE
1) 81030.00
For total cost = 81030, build factory in Y1 (Surabaya), Y3 (Gresik), and Y4 (Tangerang), distribute: X11 (Surabaya—JTM) = 2000 X32 (Gresik—JTG) = 1800 X34 (Gresik—JKT) = 2200 X43 (Tangerang—JB) = 1500 X44 (Tangerang—JKT) = 800 X45 (Tangerang—SS) = 1700
Solution
Variabel yi JTM JTG JB JKT SS
Surabaya 1 2000 0 0 0 0 Pasuruan 0 0 0 0 0 0 Gresik 1 0 1800 0 2200 0
Tangerang 1 0 0 1500 800 1700
Penyelesaian dengan Solver Excel
Solusi Akhir
Dari hasil di atas dapat diketahui hal-hal sebagai berikut :
• Pabrik di Surabaya menyalurkan produk ke pasar JTM sebanyak 2000 unit.
• Pabrik di Gresik menyalurkan produk ke pasar JTG sebanyak 1800 unit dan ke pasar JKT sebanyak 2200 unit.
• Pabrik di Tangerang menyalurkan produk ke pasar JB sebanyak 1500 unit, ke JKT 800 unit, dan ke SS sebanyak 1700 unit.
• Total biaya pengiriman yang dihasilkan adalah sebesar Rp 81.030 per tahun.
Factory and Warehouse Location-Delivery
Problem
Market area (j)
x14 x46
5
Homework:
Use LP software to solve the following problem. You are to decide the most economical factory and warehouse selections.From ׀To W1 W2 W3 Annual. fixed cost
Capacity
F1 320 330 400 2,200,000 4000
F2 400 300 370 1,800,000 4800
F3 200 220 250 2,500,000 5200
F!T M1 M2 M3 M4 M5 Ann.
Fixed cost
Annual Capacity
W1 420 320 320 220 180 200,000 3700
W2 350 180 700 120 110 350,000 4800
W3 230 620 200 340 250 380,000 5000
Annual Demand
